Exhibit 16-5
Exhibit 16-5 represents the market for leaf tobacco. Suppose the government imposes a
floor of $1.25 in this market. How much consumer surplus would be gained in the face
of this price support?
a. $900
b. $975
c. $1050
d. $1125
e. $1200
Under a regressive income tax system, individuals with higher incomes pay higher
marginal tax rates.
a. True
b. False
Exhibit 19-9
If the country in Exhibit 19-9 is initially trading without restrictions at a world price of
$2.00 and an import quota of 50 units per month is enacted, the welfare loss resulting
from higher domestic production costs is represented by area
a. a
b. b
c. c + d
d. b + d
e. e
If the government wants a natural monopoly to earn a “fair return” or zero economic
profit, it will set
a. price equal to marginal cost
b. price equal to average total cost
c. price equal to average revenue
d. marginal cost equal to marginal revenue
e. marginal cost equal to average total cost
Exhibit 13-6
In Exhibit 13-6, the marginal revenue product of the
a. second sewing machine is $20
b. fourth sewing machine is $80
c. first sewing machine is $30
d. third sewing machine is $72
e. fifth sewing machine is $40
A decrease in the price of peanuts will cause a leftward shift of the supply curve of
peanut butter.
a. True
b. False
Rent-seeking behavior imposes no costs on society because it is elected officials who
actually make public sector decisions.
a. True
b. False
Public policy can help achieve more efficient use of an economy’s resources by
eliminating all monopolies.
a. True
b. False
The rail system in Metropolis is a natural monopoly. If the government regulates the
system by setting the fare equal to marginal cost, which of the following will be true?
a. Profit will be zero under regulation.
b. Only normal profit will be earned under regulation.
c. Accounting profit will be zero under regulation.
d. Economic loss will occur under regulation.
e. Profit will be higher than if the monopoly were unregulated.
Suppose a price-taking firm produces 400 units at its optimal output level. At that
output rate marginal cost is $200, average total cost is $240, and average variable cost
is $170. What can you determine about the market price that would force the firm to
shut down in the short run?
a. It equals $200.
b. It is between $170 and $240.
c. It is less than $170.
d. It is between $170 and $200.
e. It equals $240.
An oligopoly is characterized by
a. few firms, which have control over market price
b. many firms and some barriers to entry
c. a large number of firms and no barriers to entry
d. a single firm and no barriers to entry
e. a single firm and significant barriers to entry
Suppose that the wage for drive-thru clerks is $7 an hour at Burger King and $6.50 at
McDonald’s. The jobs are alike in all other respects. We would expect
a. an increase in the supply of and demand for drive-thru clerks at Burger King
b. an increase in the supply and a decrease in the demand for drive-thru clerks at Burger
King
c. a decrease in the supply of drive-thru clerks at Burger King but no change in demand
d. an increase in the supply of drive-thru clerks at Burger King but no change in
demand
e. a decrease in the supply of and demand for drive-thru clerks at Burger King
A signal is
a. anything used to show employees in a market that demand in a profession has
increased
b. anything used to show employees in a market that supply in a profession has
increased
c. a proxy used to indicate possession of unobservable qualities required for a particular
job
d. a way for employers to discriminate against certain groups of people
e. a way for employees to learn to stay out of certain professions
The experimental evidence on posted-offer pricing suggests that
a. such markets adjust more quickly to changing conditions than double continuous
auctions markets do
b. such markets do not adjust as quickly to changing conditions as double continuous
auction markets do
c. quantities adjust more quickly to changing conditions than prices do
d. prices adjust more quickly to changing conditions than quantities do
e. the quality of goods and services often adjusts more quickly to changing conditions
that either price or quantity does
Compared to the distribution of money income, the distribution of income that takes
into consideration the effects of taxes and in-kind benefits
a. is less even
b. is the same
c. is more even
d. is fairer
e. is less fair
Children of female heads of households are five times more likely to live in poverty
than other children.
a. True
b. False
Both income elasticity of demand and cross-price elasticity of demand coefficients can
take on negative, zero, or positive values.
a. True
b. False
If production is subject to economies of scale,
a. countries can gain from trade if each nation specializes
b. one country will develop an absolute advantage in the production of all goods
c. higher output levels result in higher average production costs
d. one country will develop a comparative advantage in the production of all goods
e. countries cannot gain from trade
Points outside the production possibilities frontier represent
a. unemployment of resources
b. inefficient use of resources
c. combinations that are attainable only if all resources are used fully and efficiently
d. currently unattainable combinations of outputs
e. the only currently attainable combinations from which society must choose
Exhibit 17-8
Exhibit 17-8 represents the consumer market for higher education. If people base their
education decisions on the marginal social benefit of education, what would be the
social gain?
a. $1,000
b. $2,000
c. $3,000
d. $4,000
e. $5,000
Exhibit 1-15
Refer to Exhibit 1-15. The reason that Line (a) would shift to the position of Line (b) is
a. a change in quantity
b. a change in price
c. a change in an assumption about the relationship between the two variables observed
d. a change from a positive relation to a negative relation
e. a change from a negative relation to a positive relation
A production possibilities frontier can shift inward if there is
a. an increase in the unemployment rate
b. mandatory retirement at age 55
c. an improvement in technology
d. a larger work force
e. a larger capital stock
If a country runs a deficit in its current account, it is because
a. exports exceed imports
b. imports exceed exports
c. net unilateral transfers are negative
d. foreign currency received from exports and transfers exceeds the foreign exchange
needed to pay for imports and to make unilateral transfers
e. foreign currency received from exports and transfers is less than the foreign exchange
needed to pay for imports and to make unilateral transfers
Which of the following is not true of isoquants?
a. isoquants farther from the origin represent greater output
b. isoquants slope downward to the right
c. isoquants never intersect one another
d. isoquants shift leftward when input prices increase
e. isoquants tend to be convex to the origin (bowed toward the origin)
All combinations of Pepsi and coffee that yield Geraldo the same satisfaction lie along a
particular
a. demand curve
b. marginal utility curve
c. budget line
d. income-consumption curve
e. indifference curve
An increase in professors’ salaries increases the supply of college education.
a. True
b. False
Which act of Congress extended the government’s authority to block horizontal and
vertical mergers?
a. the Clayton Act
b. the Sherman Antitrust Act
c. the Wheeler-Lea Act
d. the Celler-Kefauver Anti-Merger Act
e. the Herfindahl-Hirschmann Act
Suppose a firm is a price searcher in the product market and hires labor in a perfectly
competitive labor market. If the wage rate is $20, the marginal product of the last
worker hired is 5, and the firm is hiring the profit-maximizing amount of labor, then the
marginal revenue product of the last worker hired must be
a. $1
b. $1.50
c. $4
d. $5
e. $20
The impact of a $200 increase in income on quantity demanded would be called an
income effect.
a. True
b. False
Exhibit 13-4
Exhibit 13-4 shows data gathered by Memo Co. as it prepares to purchase personal
computers for its sales offices. Given the data in Exhibit 13-4, the price of personal
computers must be
a. $5,000 each
b. $500 each
c. $250 each
d. $200 each
e. increasing as Memo Co. purchases more personal computers
Which of the following would not cause the budget line between books and food to
shift?
a. A fall in the price of books.
b. A fall in the price of food.
c. A change in the consumer’s preferences.
d. A fall in income.
e. A fall in income coupled with a rise in the price of food.
Economic theories are
a. useful because they are as exact as theories in the physical sciences
b. useless because they are based on abstractions
c. useful because they allow us to make predictions
d. too complex to understand because they include all of reality
e. useful in predicting events only if their assumptions are realistic
Exhibit 12-3
In Exhibit 12-3, which of the following is true when the wage rate increases from $11 to
$13?
a. The substitution effect will cause the person to work more hours.
b. The income effect will cause the person to work more hours.
c. The substitution effect will cause the person to work fewer hours.
d. The income effect will cause the person to work the same number of hours.
e. The substitution effect will cause the person to work the same number of hours.